SEC Issues $4 Million Whistleblower Award

Written September 23, 2016 by Janine Arno

On September 20, 2016, the Securities and Exchange Commission (SEC) announced an award of more than $4 million to a whistleblower whose original information alerted the agency to a fraud.   The SEC’s Whistleblower Program has awarded more than $111 million to 34 whistleblowers since its inception in 2011.   SEC enforcement actions from whistleblower tips have resulted in more than $500 million in financial remedies.

“Our program continues to incentivize whistleblowers to come forward with solid information that helps us bring violators to justice before more wrongdoing can occur,” said Jane Norberg, Acting Chief of the SEC’s Office of the Whistleblower.

By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity.  The SEC also provide provisions to safeguard whistleblowers from retaliation.

Whistleblowers who voluntarily provide the SEC with unique and useful information that leads to a successful enforcement action may be eligible for an award.  Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million.  All payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators.

For more information about the SEC Whistleblower Program and the Firm’s resources in this area, please visit the Robbins Geller Rudman & Dowd LLP Whistleblower page.

CFTC Issues Record Whistleblower Award

Written April 12, 2016 by Janine Arno

Last week the United States Commodity Futures Trading Commission (CFTC) announced its third and largest award, more than $10 million, as part of its whistleblower program.  The CFTC did not disclose the identity of the whistleblower or details about the information that led to the enforcement action.

Christopher Ehrman, the Director of the CFTC’s Whistleblower Office, stated, “The Whistleblower Program is working. My hope is that this multimillion dollar award will encourage others to come forward with information that will assist the Commission in protecting our markets.”

The CFTC’s Whistleblower Program was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.  Whistleblowers who voluntarily provide the CFTC with unique and useful information regarding violations of the Commodity Exchange Act that leads to a successful enforcement action may be eligible for an award.  Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million.  The law also includes provisions to protect the anonymity of the whistleblower if represented by counsel, and provisions to safeguard whistleblowers from retaliation.

For more information about the CFTC Whistleblower Program and the Firm’s resources in this area, please visit the Robbins Geller Rudman & Dowd LLP Whistleblower page.

Medical Equipment Company, Olympus Corp., Agrees to Pay Record Settlement to Resolve Illegal Kickback Allegations of Payments to Doctors and Hospitals Under the False Claims Act

Written March 3, 2016 by Janine Arno

On March 1, 2016, the Department of Justice (DOJ) announced that Olympus Corp. of the Americas (OCA), the United States’ largest distributor of endoscopes and related equipment, will pay $623.2 million to resolve criminal charges and civil claims under the False Claims Act relating to a scheme to pay kickbacks to doctors and hospitals.  The DOJ also announced that a subsidiary of the distributor will pay $22.8 million to resolve criminal charges relating to the Foreign Corrupt Practices Act in Latin America.

According to the DOJ, this settlement is the largest total amount paid in U.S. history by a medical device company for violations of the Anti-Kickback Statute (AKS), which prohibits payments to induce purchases paid for by federal health care programs. Those kickbacks included OCA giving a hospital a $5,000 grant to set up a $750,000 sale, refusing to give a $50,000 research grant until a hospital agreed to buy their medical equipment, paying for three doctors to go to Japan in exchange for switching to OCA, and giving a doctor with buying power in a New York medical center $400,000 in free equipment.   These and other kickbacks helped OCA obtain more than $600 million in sales and realize gross profits of more than $230 million.

“The Department of Justice has longstanding concerns about improper financial relationships between medical device manufacturers and the health care providers who prescribe or use their products,” said Principal Deputy Assistant Attorney General Benjamin Mizer of the DOJ’s Civil Division.  “Such relationships can improperly influence a provider’s judgment about a patient’s health care needs, result in the use of inferior or overpriced equipment, and drive up health care costs for everybody.  In addition to yielding a substantial recovery for taxpayers, this settlement should send a clear message that we will not tolerate these types of abusive arrangements, and the pernicious effects they can have on our health care system.”

Details of OCA’s kickback scheme were brought to the government’s attention by John Slowik, OCA’s former chief compliance officer, who brought a lawsuit in federal court in New Jersey under the qui tam provisions of the federal and various state False Claims Acts.  Under the False Claims Act, private citizens can bring suit on behalf of the government for false claims and share in any recovery.   As a result of Mr. Slowik’s whistleblower efforts, he will receive $44.1 million from the federal share and $7 million from the state share of the civil settlement amount.

The case is captioned as United States ex rel. John Slowik et al. v. Olympus Corporation of the Americas, et al., Civ. No. 10-cv-5994 (D.N.J.)

For additional information about the False Claims Act, and the Firm’s services and resources for whistleblowers in general, please visit the Robbins Geller Rudman & Dowd LLP whistleblower site.

SEC Awards Whistleblower More Than $700,000 for Detailed Analysis

Written January 19, 2016 by Janine Arno

The Securities and Exchange Commission (SEC) has awarded a whistleblower more than $700,000 to a company outsider who conducted a detailed analysis that led to a successful SEC enforcement action.

“The voluntary submission of high-quality analysis by industry experts can be every bit as valuable as first-hand knowledge of wrongdoing by company insiders,” said Andrew Ceresney, Director of the SEC’s Enforcement Division.  “We will continue to leverage all forms of information and analysis we receive from whistleblowers to help better detect and prosecute federal securities law violations.”

Sean X. McKessy, Chief of the SEC’s Office of the Whistleblower, added, “This award demonstrates the Commission’s commitment to awarding those who voluntarily provide independent analysis as well as independent knowledge of securities law violations to the agency.  We welcome analytical information from those with in-depth market knowledge and experience that may provide the springboard for an investigation.”

The SEC’s whistleblower program has paid more than $55 million to 23 whistleblowers since the program’s inception in 2011.  Whistleblowers who voluntarily provide the SEC with unique and useful information that leads to a successful enforcement action may be eligible for an award.  Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million.  All payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators.  The law also includes provisions to protect the anonymity of the whistleblower if represented by counsel, and provisions to safeguard whistleblowers from retaliation.

For more information about the SEC Whistleblower Program and the Firm’s resources in this area, please visit the Robbins Geller Rudman & Dowd LLP Whistleblower page.

DaVita to Pay $450 Million to Resolve Allegations that It Sought Reimbursement for Unnecessary Drug Wastage

Written June 29, 2015 by Robert Lu

On Wednesday, June 24, 2015, the U.S. Justice Department announced that DaVita Healthcare Partners Inc., the largest provider of dialysis services in the United States, has agreed to pay $450 million to resolve claims that it violated the False Claims Act.

The settlement resolves allegations brought by a whistleblower action, which said that DaVita devised and employed dosing grids and/or protocols specifically designed to create unnecessary waste of the drugs Venofer and Zemplar. These drugs are typically packaged in single-use vials, which are intended for one-time use by patients. Sometimes, the amount of the drug in the vials does not match the dosage specified by the physician, resulting in the remainder of the drug in the vial being discarded.

At the time of the alleged scheme, Medicare would reimburse a dialysis provider for certain waste if the dialysis provider – acting in good faith – discarded the remainder of the drug contained in a single-use vial after administering the requisite dose and/or quantity of the drug to a Medicare patient. According to the scheme alleged by the whistleblower action, DaVita instructed its employees to provide Zemplar to dialysis patients pursuant to mandatory and wasteful “dosing grids,” in order to maximize the amount of dosage prescribed to patients, thus maximizing Medicare reimbursements for DaVita.

The allegations resolved in the settlement arose from a lawsuit filed by two whistleblowers, Dr. Alon Vanier and nurse Daniel Barbir, under the qui tam provisions of the False Claims Act. Under the Act, private citizens can bring suit on behalf of the government for false claims and share in any recovery.

The lawsuit is captioned United States ex rel. Alon J. Vainer, M.D., F.A.C.P. and Daniel D. Barbir, R.N., Plaintiffs v. DaVita, Inc. and Gambro Healthcare, Inc., and their respective subsidiaries and affiliated companies, Defendants, No. 1:07-cv-2509-CAP (N.D. Ga.). The claims settled by this agreement are allegations only; there has been no determination of liability.

For additional information about the False Claims Act, and the Firm’s services and resources for whistleblowers in general, please visit the Robbins Geller Rudman & Dowd LLP whistleblower site.

First Tennessee Bank N.A. Agrees to Pay $212.5 Million to Resolve False Claims Act Liability Arising from FHA-Insured Mortgage Lending

Written June 11, 2015 by Robert Lu

On June 1, 2015, the Department of Justice announced that First Tennessee Bank N.A., headquartered in Memphis, Tennessee, has agreed to pay the U.S. Government $212.5 million to resolve allegations that it violated the False Claims Act by certifying mortgage loans insured by the U.S. Department of Housing and Urban Development (HUD) Federal Housing Administration (FHA) that did not meet HUD’s underwriting requirements.

The settlement resolves allegations that First Tennessee, through its subsidiary First Horizon Home Loans Corporation, failed to comply with FHA origination, underwriting and quality control requirements. According to the lawsuit filed by the Government, between January 2006 and October 2008, First Horizon allegedly claimed that mortgage loans it had approved qualified for FHA insurance coverage, when in fact these loans did not meet FHA’s guidelines. Because First Horizon is a Direct Endorsement Lender, it has the authority to originate, underwrite and endorse mortgages for FHA insurance and these loans are not reviewed by either FHA or HUD. As a result, according to the lawsuit, First Horizon created mortgages that it knew were high risk, submitted claims for reimbursement when these loans failed, and received insurance payments from HUD for these defaulted loans.

This alleged practice by First Horizon violated the False Claims Act. First Tennessee’s conduct (through its subsidiary First Horizon) caused FHA to insure hundreds of loans that were not eligible for insurance and, as a result, FHA suffered substantial losses when it later paid insurance claims on those loans.

For additional information about the False Claims Act and the Firm’s resources and services for whistleblowers in general, please visit the Robbins Geller Rudman & Dowd LLP whistleblower site.

Durable Medical Equipment Suppliers to Pay $7.5 Million to Resolve False Claims Act Allegations

Written June 2, 2015 by Robert Lu

The U.S. Justice Department announced Wednesday, May 27, 2015, that it had reached a $7.5 million settlement with two medical equipment suppliers, Orbit Medical Inc. and its partial successor Rehab Medical Inc., over allegations that the businesses filed false claims for power wheelchairs and accessories to federal health care programs.

Orbit Medical and Rehab Medical are durable medical equipment suppliers based in Salt Lake City and Indianapolis, respectively.

Medicare will only pay for power wheelchairs for individuals who cannot use other forms of equipment, such as a cane, walker or power scooter, to move around their homes and perform daily activities. Physicians must meet with individuals face-to-face, examine the person and provide a power wheelchair prescription within 45 days of the examination. The treating physician is also required to give documentation that shows the power wheelchair is medically necessary. In the complaint against Orbit, representatives were accused of altering prescriptions by physicians in order to get power wheelchairs paid for by Medicare.

The allegations resolved by the settlement with Orbit and Rehab were filed under the False Claims Act by two former Orbit employees, Dustin Clyde and Tyler Jackson. Under the False Claims Act, a private party can sue for false claims on behalf of the government and share in any recovery. Clyde and Jackson will receive approximately $1.5 million. The United States intervened in the suit on April 2, 2014.

The lawsuit is captioned United States ex rel. Clyde et al. v. Orbit Medical et al., No. 2:10-CV-00297 (D. Utah). The claims settled by the government are allegations only; there has been no determination of liability.

For additional information about the False Claims Act, and the Firm’s resources and services for whistleblowers, please visit the Robbins Geller Rudman & Dowd LLP whistleblower site.

PharMerica to Pay $23.5 Million to Settle False Claims Act Lawsuit

Written May 18, 2015 by Robert Lu

On Thursday, May 14, 2015, the U.S. Justice Department announced that PharMerica Corporation has agreed to pay the United States $23.5 million to resolve a lawsuit alleging that it violated the False Claims Act by submitting false claims to Medicare for Schedule II controlled substances without first obtaining the necessary physician prescription showing a medical need.   A separate part of the lawsuit, and settlement, resolved allegations that PharMerica violated the Controlled Substances Act. That portion of the lawsuit was resolved for $8 million.

PharMerica is a long-term care pharmacy that dispenses medications to residents of long-term care facilities, including nursing homes and skilled nursing facilities. Many of the prescriptions filled by PharMerica are for controlled substances listed in Schedule II under the Controlled Substances Act. Schedule II drugs, such as oxycodone and fentanyl, can cause significant harm if used improperly and have a high potential for abuse. The lawsuit alleged that that PharMerica submitted false claims to Medicare for drugs dispensed without valid prescriptions in violation of the Controlled Substances Act.
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Sixteen Hospitals Agree to Pay the United States Nearly $16 Million to Resolve False Claims Act Allegations of Submitting Claims for Medically Unnecessary Psychiatric Procedures

Written May 7, 2015 by Robert Lu

On May 7, 2015, the U.S. Justice Department announced that 16 separate hospitals (as well as their respective corporate parents) have agreed to collectively pay nearly $16 million to resolve allegations that they sought and received reimbursement from Medicare for medically unnecessary or unreasonable services in violation of the False Claims Act.

This case involves a procedure called Intensive Outpatient Psychotherapy (IOP). IOP services represent a continuation of ambulatory psychiatric services and provide active treatment to individuals with mental disorders. Medicare generally pays for an appropriate course of IOP treatment provided a number of specific requirements are satisfied including, most notably, that the services in question are reasonable and necessary for the diagnosis and treatment of the patient’s condition.
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U.S. Senate Approves Motor Vehicle Safety Whistleblower Act

Written April 30, 2015 by Robert Lu

On April 28, 2015, the U.S. Senate approved the first piece of auto safety legislation, a bill to incentivize auto industry whistleblowers, following the widespread recalls by General Motors Co. and Takata Corp. of tens of millions of vehicles and air bags, respectively.

The bill would grant the U.S. transportation secretary discretion to award up to 30% of the total monetary penalties resulting from Department of Transportation or Justice Department enforcement actions that total more than $1 million. The bill covers employees or contractors of motor vehicle manufacturers, parts suppliers and dealerships.

The full text of the bill, and the legislative history and actions taken to date, can be found here.

For additional information about whistleblower laws and the Firm’s resources and services in this area, please visit the Robbins Geller Rudman & Dowd LLP Whistleblower page.